Private Retirement Scheme (PRS) – A Guide to

Malaysia’s Voluntary Private Retirement Scheme

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The ‘soft’ launch of Malaysia’s voluntary Private Retirement Scheme (PRS) in July 2012 was
greeted with much fanfare, but what is it exactly, and how can savers / investors / residents in
Malaysia benefit? Find out in our article here!

NOTE: This is not an article about the Employers Provident Fund (EPF), which is Malaysia’s
mandatory Private Retirement Scheme, for more on the EPF, see the full EPF Guide.

What is the Private Retirement Scheme (PRS)?

In short, the PRS is a defined contribution pension scheme which allows people (or their
employers) to voluntarily contribute into an investment vehicle for the purposes of building up
their retirement income.

In a Malaysian retirement framework, it is to be complemented with (and not a substitute for) the
mandatory contributions made by both employee and employers to the EPF scheme.
Having a voluntary scheme in addition to the EPF also allows private company employees and
self-employed persons to voluntarily contribute towards their retirement in a systematic way.

Similarities of PRS with the EPF:

1. Retirement Purpose: Both the EPF and PRS schemes are for building up a person’s
retirement assets and income.

2. Tax Benefit: Tax relief is given for contributions to both schemes (up to RM6,000 a year for
EPF, a seperate RM3,000 for PRS)

PRS vs EPF: A Summary

Feature Differences PRS EPF

Contribution Type Voluntary Mandatory

Statutory minimum (11% Employee, 12-13%

Contribution Amount No statutory minimum or maximum
Employer)

Contribution Frequency No statutory interval Statutory Monthly Contribution

Contribution Paid to Individual PRS Providers EPF Directly

Yearly Personal Tax Relief RM3,000 RM6,000

Partial Withdrawal From Sub-Account B only, and 8% Tax Penalty Account 2 only, specific reasons no penalty

Selection of Fund
Freedom of Selection (among PRS Providers) Freedom only on Partial Amount (EPF-MIS)
Investments

No statutory minimum (depends on Fund

Dividend Policy Minimum 2.5% p.a.
performance)

PRS Providers
The PRS Providers are fund management firms which are approved by the PRS administrators
to manage the investment vehicles that contributions get paid into.

The eight PRS Providers approved (as of 25th April 2013) are:
 AmInvestment Management Sdn Bhd;
 AIA Pension and Asset Management Sdn. Bhd
 CIMB- Principal Asset Management Bhd
 Hwang Investment Management Berhad
 Manulife Asset Management Services Bhd (formerly known as Manulife Unit Trust
Bhd)
 Public Mutual Bhd
 RHB Investment Management Bhd
 Kenanga Investors Bhd

PRS Features – Contributions, Investment, Benefits,

Withdrawals
While the major points are covered in the summary above, in this section we will attempt to give
a bit more detail about the specific features about the PRS.

Contributions
Unlike the EPF, PRS contributions are not mandatory, and they can be made by either an
individual or an employer. There is no statutory minimum amount (although PRS providers may
specify a minimum amount as per their own internal investment policy) and no statutory time
interval for contributions.

Investment Choices
In the PRS scheme, individuals themselves have the autonomy to decide on fund investments
(similar to the EPF-MIS scheme, but this time with the entirety of their contribution rather than a
small amount), meaning that individuals can tailor their investments according to their own risk-
return profile, whereas in the general EPF scheme they would have their retirement fund subject
to a single set constraints and objectives which may not be suitable for everyone.

Members would have the option to contribute to more than one fund under a PRS or to contribute
to more than one PRS, offered by different PRS Providers. The PPA provides quite a handy
graphic to depict this process:
A default option would also be made available for members who select their PRS Provider but do
not specify a fund option. The default option would cater for different age groups, with aggressive
funds for younger investors and conservative funds for older investors.

Members would also have the option to switch funds within a PRS at any time, or change to
another PRS Provider once a year subject to terms imposed by the PRS Provider. The first
transfer can only be requested by a member one year after making the first contribution to any
fund under the Scheme.

Dividend Policy
WARNING: Unlike the EPF’s statutory minimum dividend rate of 2.5% p.a., the PRS does
not have one, and as it involves investments which can go up as well as down, and herein
lies the biggest difference. If EPF investments don’t perform well, the EPF still has to give
positive returns (this 2.5%) to their members, whereas PRS members may see non-
dividend paying years or even worse, their pension investments going down in value,
regardless of choice of risk-return profile of investment.

Benefits
In the Malaysian Government’s Budget 2012, there is a specified tax relief of up to RM3,000 for
10 years beginning 2012 for contributions to the PRS. This is similar to the tax relief given to EPF
contributions. For top tax rate payers, this amounts to a saving of RM780 a year!

A tax exemption is also given on all income generated by the PRS Funds. For 2014, Government
gives one-off RM500 for RM1,000 invested in PRS to youth between 20-30 years old.

Withdrawals
Similarly to the EPF, contributions in the PRS are split into two types of sub-accounts (they are
lumped together for investment purposes but the seperation is to identify the withdrawal status),
70% in Sub-Account A and 30% in Sub-Account B.

The entire fund in your PRS can be withdrawn upon reaching retirement age (currently 55 years),
death or emigration.

Partial withdrawal for pre-retirement (prior to reaching 55 years of age) is allowed as well, but this
can be only from Sub-Account B once a year and will incur an 8% tax penalty on the withdrawal
amount. This is unlike the EPF Account 2 where withdrawals can be made without penalty for
specific purposes (buying a house, paying for education etc.).